Case: 19-60896 Document: 00515477018 Page: 1 Date Filed: 07/02/2020 No. 19-60896 In the United States Court of Appeals for the Fifth Circuit HUAWEI TECHNOLOGIES USA, INC., AND HUAWEI TECHNOLOGIES CO., LTD., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, Respondents. On Petition for Review of an Order of the Federal Communications Commission REPLY BRIEF FOR PETITIONERS HUAWEI TECHNOLOGIES USA, INC., AND HUAWEI TECHNOLOGIES CO., LTD. Andrew D. Lipman Glen D. Nager Russell M. Blau Michael A. Carvin David B. Salmons Shay Dvoretzky MORGAN, LEWIS & BOCKIUS LLP Counsel of Record 1111 Pennsylvania Ave., N.W. Karl R. Thompson Washington, D.C. 20004 Parker A. Rider-Longmaid (202) 739-3000 JONES DAY andrew.lipman@morganlewis.com 51 Louisiana Ave., N.W. Washington, D.C. 20001-2113 (202) 879-3939 July 2, 2020 sdvoretzky@jonesday.com Counsel for Petitioners Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. Case: 19-60896 Document: 00515477018 Page: 2 Date Filed: 07/02/2020 CERTIFICATE OF INTERESTED PERSONS No. 19-60896, Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. v. Federal Communications Commission and United States of America The undersigned counsel of record certifies that the following listed persons and entities as described in the fourth sentence of Fifth Circuit Local Rule 28.2.1 have an interest in the outcome of this case. These rep- resentations are made in order that the judges of this Court may evaluate possible disqualification or recusal. 1. Petitioner Huawei Technologies USA, Inc., is a wholly owned, indirect subsidiary of Huawei Investment & Holding Co., Ltd. Specifi- cally, Huawei Technologies USA, Inc., is wholly owned by Huawei Tech- nologies Coöperatief U.A. (Netherlands). Huawei Technologies Coöper- atief U.A. s parent corporation is Huawei Technologies Co., Ltd. (China). Huawei Technologies Co., Ltd., is 100% owned by Huawei Investment & Holding Co., Ltd. 2. Petitioner Huawei Technologies Co., Ltd., is a wholly owned, direct subsidiary of Huawei Investment & Holding Co., Ltd. 3. Huawei Investment & Holding Co., Ltd., has no parent corpo- ration, and no publicly held corporation owns 10% or more of its stock. Of i Case: 19-60896 Document: 00515477018 Page: 3 Date Filed: 07/02/2020 Huawei Investment s shares, (a) just over 1% are owned by the founder of Huawei, Mr. Ren Zhengfei, and (b) the remainder are owned by the Union of Huawei Investment & Holding Co., Ltd., which administers an employee stock ownership plan in which nearly 97,000 employees partic- ipate. 4. The Federal Communications Commission is a federal agency. 5. The United States of America is a respondent by statute. See 28 U.S.C. § 2344; 47 U.S.C. § 402(a). 6. The order on review potentially impacts the financial inter- ests of the telecommunications industry as a whole, including manufac- turers, end users, and service providers in a broad range of industries, such as internet, cellular and landline telephone, and similar telecommu- nications applications. Such entities may include, among others, the par- ties that participated in the proceedings before the Federal Communica- tions Commission and that therefore received service of the petitions for review in this case. See Pet. for Review 11-16 (filed Dec. 4, 2019; docketed Dec. 5, 2019); Pet. for Review 12-17 (Jan. 7, 2020). Those persons or en- tities are: ii Case: 19-60896 Document: 00515477018 Page: 4 Date Filed: 07/02/2020 a. Caressa D. Bennet, Erin P. Fitzgerald, and Rural Wireless As- sociation, Inc. b. Wireless Internet Service Providers Association and its coun- sel, Stephen E. Coran and David S. Keir of Lerman Senter PLLC c. Hytera Communications Corp. Ltd. and its counsel, William K. Keane and Patrick McPherson of Duane Morris LLP d. Cinnamon Rogers, Dileep Srihari, Savannah Schaefer, and Telecommunications Industry Association e. Rural Wireless Broadband Coalition and Rural Broadband Al- liance and their counsel, Russell D. Lukas and David A. La- Furia of Lukas, LaFuria, Gutierrez & Sachs, LLP f. Michael Saperstein and USTelecom Association g. Competitive Carriers Association and its counsel, Theodore B. Olson, Thomas H. Dupree Jr., and Andrew G.I. Kilberg of Gib- son, Dunn & Crutcher LLP h. Genevieve Morelli, Michael J. Jacobs, and ITTA i. John A Howes, Jr., and Computer & Communications Indus- try Association j. WTA  Advocates for Rural Broadband and its counsel, Gerald J. Duffy of Blooston, Mordkofsky, Dickens, Duffy & Prender- gast, LLP k. Jill Canfield, Jesse Ward, and NTCA  The Rural Broadband Association l. Mark Twain Communications Co. and its counsel, Donald L. Herman, Jr., Carrie DeVier, and Clare Liedquist of Herman & Whiteaker, LLC iii Case: 19-60896 Document: 00515477018 Page: 5 Date Filed: 07/02/2020 m. Brian Hendricks, Jeffrey Marks, and Nokia n. Dr. J. Michel Guite, Vermont Telephone Co., Inc., and VTel Wireless, Inc. o. Rick Chessen and NCTA  The Internet and Television Asso- ciation p. David S. Addington and National Federation for Independent Business, Inc. q. Jeffry H. Smith and GVNW Consulting, Inc. r. Jennifer A. Manner, Paul Kay, Echostar Satellite Operating Corp., and Hughes Network Systems, LLC s. Gary Rawson, State E-Rate Coordinators Alliance, and Mis- sissippi Department for Information Technology Services t. David Hartshorn and Global VSAT Forum u. NE Colorado Cellular, Inc., and its counsel, David A. LaFuria of Lukas, LaFuria, Gutierrez & Sachs, LLP v. Pine Belt Communications, Inc., and its counsel, Donald L. Herman, Jr., and Carrie L. DeVier of Herman & Whiteaker, LLC w. Tom Stroup and Satellite Industry Association x. Marijke Visser, Ellen Satterwhite, Alan S. Inouye, and Amer- ican Library Association y. AT&T Services, Inc., and its counsel, James J.R. Talbot, Gary L. Phillips, and David L. Lawson z. Melanie K. Tiano, Thomas C. Power, Scott K. Bergmann, Thomas K. Sawanobori, and CTIA iv Case: 19-60896 Document: 00515477018 Page: 6 Date Filed: 07/02/2020 aa. JAB Wireless, Inc., and their counsel, Stephen E. Coran and F. Scott Pippin of Lerman Senter PLLC bb. Francisco J. Silva and Puerto Rico Telephone Co., Inc. cc. Sagebrush Cellular, Inc., and its counsel, Michael R. Bennet of Womble Bond Dickinson (US) LLP dd. Frank Korinek and Motorola Solutions, Inc. ee. Rick Salzman, Mark Rubin, and TracFone Wireless, Inc. ff. Todd Houseman, United Telephone Association, Inc., United Wireless Communications, Inc., and United Communications Association, Inc. gg. Joseph Franell and Eastern Oregon Telecom hh. Jane Kellogg and Deborah J. Sovereign of Kellogg & Sover- eign Consulting, LLC ii. Matthew M. Polka, Brian D. Hurley, and American Cable As- sociation jj. Ross J. Lieberman and ACA Connects  America s Communi- cations Association kk. Robert F. West and CoBank, ACB ll. Geoff Feiss and Montana Telecommunications Association mm. Union Telephone Company and its counsel, David A. LaFuria of Lukas, LaFuria, Gutierrez & Sachs, LLP nn. Tracy S. Weeks and State Educational Technology Directors Association oo. Aarti Holla and EMEA Satellite Operators Association v Case: 19-60896 Document: 00515477018 Page: 7 Date Filed: 07/02/2020 The parties and their counsel are: Petitioner Counsel Huawei Technologies Glen D. Nager USA, Inc. Michael A. Carvin Shay Dvoretzky Karl R. Thompson Parker A. Rider-Longmaid JONES DAY 51 Louisiana Ave., N.W. Washington, D.C. 20001-2113 (202) 879-3939 sdvoretzky@jonesday.com Andrew D. Lipman Russell M. Blau David B. Salmons MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., N.W. Washington, D.C. 20004 (202) 739-3000 andrew.lipman@morganlewis.com Huawei Technologies Glen D. Nager Co., Ltd. Michael A. Carvin Shay Dvoretzky Karl R. Thompson Parker A. Rider-Longmaid JONES DAY 51 Louisiana Ave., N.W. Washington, D.C. 20001-2113 (202) 879-3939 sdvoretzky@jonesday.com vi Case: 19-60896 Document: 00515477018 Page: 8 Date Filed: 07/02/2020 Andrew D. Lipman Russell M. Blau David B. Salmons MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Ave., N.W. Washington, D.C. 20004 (202) 739-3000 andrew.lipman@morganlewis.com Respondent Counsel United States Federal Thomas M. Johnson, Jr., Communications General Counsel Commission Ashley Boizelle, Deputy General Counsel Jacob Matthew Lewis, Associate General Counsel Matthew Joel Dunne, Counsel Scott M. Noveck, Counsel Federal Communications Commission Office of General Counsel 445 12th St. S.W. Eighth Floor Washington, D.C. 20554 United States of America Joseph H. Hunt, Assistant Attorney General Sharon Swingle, Civil Division, Appellate Staff Dennis Fan, Civil Division, Appellate Staff U.S. Department of Justice 950 Pennsylvania Ave., N.W. Washington, D.C. 20530 vii Case: 19-60896 Document: 00515477018 Page: 9 Date Filed: 07/02/2020 Dated: July 2, 2020 Respectfully submitted, /s/ Shay Dvoretzky Counsel of Record for Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. viii Case: 19-60896 Document: 00515477018 Page: 10 Date Filed: 07/02/2020 TABLE OF CONTENTS Page CERTIFICATE OF INTERESTED PERSONS ........................................ i TABLE OF AUTHORITIES .................................................................... xi INTRODUCTION ..................................................................................... 1 ARGUMENT ............................................................................................ 4 I. Huawei s challenge to the USF rule is ripe .................................... 4 II. The Commission lacks authority for the USF rule ........................ 5 A. Traditional tools of statutory construction demonstrate that the FCC lacks authority to limit the use of USF funds based on national security judgments ......................... 6 B. The FCC s counterarguments fail .......................................... 9 1. The Commission may not recharacterize its national security and foreign affairs judgments on appeal as modest technical assessments ................. 9 2. The provisions of the USF statute that the FCC cites do not support the rule ............................... 10 3. CALEA cannot support the USF rule ......................... 16 4. The FCC is not entitled to Chevron deference ........... 17 5. The USF rule requires affirmative statutory authority ...................................................... 18 C. Congress did not (and could not) give the FCC authority to rest USF rules on national security or foreign affairs judgments ................................................. 19 III. The Commission violated the APA and due process in adopting the USF rule .............................................................. 21 A. The USF rule is not a logical outgrowth of the NPRM ......................................................................... 21 B. The USF rule is arbitrary and capricious ........................... 23 ix Case: 19-60896 Document: 00515477018 Page: 11 Date Filed: 07/02/2020 TABLE OF CONTENTS (continued) Page C. The USF rule is standardless and therefore arbitrary and capricious ....................................................... 26 D. The Commission s simultaneous issuance of the USF rule and Huawei s  initial designation was impermissibly retroactive and violated fair notice ............. 29 IV. The USF rule s  initial designation procedures violate due process ........................................................................ 34 A. The USF rule unlawfully fails to provide pre-deprivation process ........................................................ 34 B. The Commission s counterarguments are meritless ......................................................................... 34 V. The FCC s  initial designation of Huawei was unlawful ............ 39 A. This Court has jurisdiction to review the  initial designation ............................................................. 39 1. The  initial designation of Huawei is final ............... 39 2. Huawei s challenge to the  initial designation is ripe ........................................................................... 43 B. Huawei s  initial designation is arbitrary and capricious ....................................................... 43 CONCLUSION ....................................................................................... 47 CERTIFICATE OF SERVICE ................................................................ 48 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMIT ... 49 CERTIFICATE OF ELECTRONIC SUBMISSION ............................... 50 x Case: 19-60896 Document: 00515477018 Page: 12 Date Filed: 07/02/2020 TABLE OF AUTHORITIES Page(s) CASES Abbott Labs. v. Gardner, 387 U.S. 136 (1967) ............................................................................... 4 ACA Int l v. FCC, 885 F.3d 687 (D.C. Cir. 2018) .................................................. 26, 27, 28 Adm rs of Tulane Educ. Fund v. Shalala, 987 F.2d 790 (D.C. Cir. 1993) .............................................................. 33 Alenco Commc ns, Inc. v. FCC, 201 F.3d 608 (5th Cir. 2000) ............................................................... 19 Am. Ins. Ass n v. Garamendi, 539 U.S. 396 (2003) ............................................................................. 20 Ass n of Accredited Cosmetology Schs. v. Alexander, 979 F.2d 859 (D.C. Cir. 1992) .............................................................. 33 Bell Atl. Tel. Cos. v. FCC, 79 F.3d 1195 (D.C. Cir. 1996) .............................................................. 33 Bennett v. Spear, 520 U.S. 154 (1997) ................................................................. 39, 41, 42 Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988) ............................................................................. 32 Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir. 2012) ............................................................... 37 Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984) ................................................................... 1, 17, 18 Ciba-Geigy Corp. v. EPA, 801 F.2d 430 (D.C. Cir. 1986) ........................................................ 28, 41 xi Case: 19-60896 Document: 00515477018 Page: 13 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019) (en banc)................................................ 19 Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010) .............................................................. 12 Council for Urological Interests v. Burwell, 790 F.3d 212 (D.C. Cir. 2015) ........................................................ 26, 27 CSI Aviation Servs., Inc. v. DOT, 637 F.3d 408 (D.C. Cir. 2011) .............................................................. 42 De Niz Robles v. Lynch, 803 F.3d 1165 (10th Cir. 2015) ............................................................ 29 Del. Riverkeeper Network v. Sec y Pa. Dep t of Env tl Prot., 903 F.3d 65 (3d Cir. 2018) ................................................................... 40 DHS v. Regents of Univ. of Cal., No. 18-587, 2020 WL 3271746 (U.S. June 18, 2020) ................ 9, 30, 38 E. Enters. v. Apfel, 524 U.S. 498 (1998) ............................................................................. 31 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) ......................................................................... 17 FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000) ..................................................................... 7, 8, 18 Fidelity Television, Inc. v. FCC, 502 F.2d 443 (D.C. Cir. 1974) (per curiam) ........................................ 40 Foretich v. United States, 351 F.3d 1198 (D.C. Cir. 2003) ............................................................ 35 Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010) ............................................................................. 21 xii Case: 19-60896 Document: 00515477018 Page: 14 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) FTC v. Standard Oil Co., 449 U.S. 232 (1980) ....................................................................... 40, 42 Haw. Tel. Co. v. FCC, 589 F.2d 647 (D.C. Cir. 1978) .............................................................. 13 In re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014)............................................................ 15 John Corp. v. City of Houston, 214 F.3d 573 (5th Cir. 2000) ................................................................. 4 King v. Burwell, 135 S. Ct. 2480 (2015) ........................................................................... 7 La. Pub. Serv. Comm n v. FCC, 476 U.S. 355 (1986) ............................................................................. 10 Landgraf v. USI Film Prods., 511 U.S. 244 (1994) ....................................................................... 31, 33 Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110 (11th Cir. 2014) ............................................................ 39 Mathews v. Eldridge, 424 U.S. 319 (1976) ............................................................................. 35 McAndrews v. Fleet Bank of Mass., 989 F.2d 13 (1st Cir. 1993) .................................................................. 33 Michigan v. EPA, 268 F.3d 1075 (D.C. Cir. 2001) ............................................................ 19 Morgan v. United States, 304 U.S. 1 (1938) ........................................................................... 37, 38 xiii Case: 19-60896 Document: 00515477018 Page: 15 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) Motor Vehicle Mfrs. Ass n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) ................................................................... 23, 25, 45 Moving Phones P ship L.P. v. FCC, 998 F.2d 1051 (D.C. Cir. 1993) ............................................................ 14 Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019) (per curiam) ............................................ 23 Nat l Ass n of Home Builders v. U.S. Army Corps of Eng rs, 417 F.3d 1272 (D.C. Cir. 2005) ............................................................ 43 Nat l Mining Ass n v. Dep t of Interior, 177 F.3d 1 (D.C. Cir. 1999) ............................................................ 32, 33 NRA v. BATF, 700 F.3d 185 (5th Cir. 2012) ............................................................... 12 Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995) ............................................................................. 21 Qwest Corp. v. FCC, 258 F.3d 1191 (10th Cir. 2001) .............................................................. 6 Qwest Servs. Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007) ........................................................ 29, 30 Ralls Corp. v. CFIUS, 758 F.3d 296 (D.C. Cir. 2014) .............................................................. 37 Regions Hosp. v. Shalala, 522 U.S. 448 (1998) ............................................................................. 33 Renewable Fuels Ass n v. EPA, 948 F.3d 1206 (10th Cir. 2020)........................................................ 4, 43 xiv Case: 19-60896 Document: 00515477018 Page: 16 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) Rock of Ages Corp. v. Sec y of Labor, 170 F.3d 148 (2d Cir. 1999) ................................................................. 32 Russello v. United States, 464 U.S. 16 (1983) ..................................................................... 7, 12, 15 S.F. Herring Ass n v. Dep t of Interior, 946 F.3d 564 (9th Cir. 2019) ............................................................... 39 Sackett v. EPA, 566 U.S. 120 (2012) ............................................................................. 39 Sea Robin Pipeline Co. v. FERC, 127 F.3d 365 (5th Cir. 1997) ............................................................... 17 SEC v. Chenery, 318 U.S. 80 (1943) ............................................................................... 30 Seila Law LLC v. CFPB, No. 19-7, 2020 WL 3492641 (U.S. June 29, 2020) ........................ 20, 21 Sierra Club v. Trump, 929 F.3d 670 (9th Cir. 2019) ............................................................... 41 Smith v. Doe, 538 U.S. 84 (2003) ............................................................................... 31 Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014) ............................................................................... 5 Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560 (2012) ............................................................................. 11 Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393 (5th Cir. 1999) ............................................................... 19 Texas v. Thompson, 70 F.3d 390 (5th Cir. 1995) (per curiam) ............................................ 36 xv Case: 19-60896 Document: 00515477018 Page: 17 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) Texas v. United States, 497 F.3d 491 (5th Cir. 2007) ........................................................... 4, 43 Tripoli Rocketry Ass n, Inc. v. BATF, 437 F.3d 75 (D.C. Cir. 2006) ................................................................ 28 United States v. AMC Entm t, Inc., 549 F.3d 760 (9th Cir. 2008) ............................................................... 32 United States v. Brown, 381 U.S. 437 (1965) ............................................................................. 32 United States v. Lovett, 328 U.S. 303 (1946) ............................................................................. 32 Universal Camera Corp. v. NLRB, 340 U.S. 474 (1951) ....................................................................... 44, 45 USPS v. Postal Regulatory Comm n, 785 F.3d 740 (D.C. Cir. 2015) .............................................................. 26 Velez v. Levy, 401 F.3d 75 (2d Cir. 2005) ................................................................... 37 Whitman v. Am. Trucking Ass ns, 531 U.S. 457 (2001) ............................................................................. 18 Zivotofsky v. Kerry, 576 U.S. 1 (2015) ................................................................................. 20 STATUTES 5 U.S.C. § 553 .......................................................................................... 21 28 U.S.C. § 2342 ...................................................................................... 39 47 U.S.C. § 151 .................................................................................. 11, 12 47 U.S.C. § 201 .................................................................................. 11, 12 xvi Case: 19-60896 Document: 00515477018 Page: 18 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) 47 U.S.C. § 214 .................................................................................. 12, 13 47 U.S.C. § 251 ........................................................................................ 19 47 U.S.C. § 252 ........................................................................................ 19 47 U.S.C. § 253 ........................................................................................ 19 47 U.S.C. § 254 ................................................................................ passim 47 U.S.C. § 305 .................................................................................... 7, 14 47 U.S.C. § 308 .......................................................................................... 7 47 U.S.C. § 310 .................................................................................. 12, 14 47 U.S.C. § 606 .......................................................................................... 7 47 U.S.C. § 641 ........................................................................................ 11 47 U.S.C. § 1001 ...................................................................................... 16 47 U.S.C. § 1004 .................................................................................. 6, 16 47 U.S.C. § 1008 ................................................................................ 14, 15 47 U.S.C. § 1507 ................................................................................ 14, 15 47 U.S.C. § 1601 ........................................................................................ 8 47 U.S.C. § 1602 ........................................................................................ 8 47 U.S.C. § 1608 ........................................................................................ 8 Secure and Trusted Communications Networks Act of 2019, Pub. L. No. 116-124, 134 Stat. 158 (2020), 47 U.S.C. §§ 1601 1609 .......................................................... 2, 7, 8, 41 OTHER AUTHORITIES 16 C.F.R. § 2.6 .......................................................................................... 38 Microsoft Computer Dictionary 432 (5th ed. 2002) ................................ 10 xvii Case: 19-60896 Document: 00515477018 Page: 19 Date Filed: 07/02/2020 TABLE OF AUTHORITIES (continued) Page(s) SNA, Draft Declaratory Ruling, WC Dkt. 18-89 (June 25, 2020), https://tinyurl.com/y76p4q5n .................................. 41 xviii Case: 19-60896 Document: 00515477018 Page: 20 Date Filed: 07/02/2020 INTRODUCTION The Commission lacked statutory and constitutional authority for its universal service fund (USF) rule. The rule prohibits use of USF funds on equipment and services provided by companies supposedly pos- ing national security threats, and contains procedures for designating those companies. It rests on the agency s independent national security judgments about the strategic intentions of a foreign sovereign and its relationship with private companies like Huawei. But the USF statute and Communications Act direct the Commission to promote universal service through FCC-administered subsidies, without referring to na- tional security. Meanwhile, the Communications Act elsewhere expressly delegates national security authority to the executive branch, not the FCC. And delegating such authority to the Commission, an independent agency unanswerable to the President, would raise serious constitutional problems. The Commission s brief, rather than defending these errors, largely repeats them. The Commission points to statutory phrases like  quality services and  public interest, claiming Chevron deference. But those 1 Case: 19-60896 Document: 00515477018 Page: 21 Date Filed: 07/02/2020 terms do not give the FCC the powers of the Defense or State Depart- ments. Thus, lacking statutory authorization, the Commission alternates between reimagining the Order as a modest technical measure and con- tending that it needs no statutory authorization anyway, as long as the statute does not explicitly prohibit the USF rule. That is not how admin- istrative law works. And if there were lingering doubt, Congress elimi- nated it with the Secure Networks Act, which specifically addresses use of Commission subsidies to purchase putatively risky equipment, and rel- egates the FCC to implementing other entities national security determi- nations. In any event, even if the FCC had authority for the rule, it violated the Administrative Procedure Act (APA) and due process in promulgating it. Targeting Huawei, it ignored record evidence that the rule would un- dermine the purposes of the USF statute. It relied on a cost-benefit anal- ysis supported by no data and resting on the assumption that the rule would cover only Huawei and ZTE (the sole, prejudged objective from the outset). It failed to meaningfully respond to alternatives that its own ad- visors endorsed. It provided no guidance on the meaning of its standard- less terms, and no pre-deprivation due process in the USF rule before 2 Case: 19-60896 Document: 00515477018 Page: 22 Date Filed: 07/02/2020 designating companies as national security threats. And it engaged in impermissible retroactive rulemaking by simultaneously promulgating a new rule and  initially designating Huawei based on past conduct. The Commission responds by stringing together quotes from unrea- soned passages of the Order and claiming that it can  flesh out the rule s content through advisory opinions and adjudications. But repetition does not cure irrationality. The APA and Constitution demand reasoned deci- sionmaking, intelligible standards, and fair notice. The FCC s politically motivated desire to target Huawei does not authorize it to make sweeping national security judgments about foreign sovereigns and companies, flouting the APA and due process under the guise of implementing a program designed to ensure comparable services at comparable rates nationwide. The Order should be vacated. 3 Case: 19-60896 Document: 00515477018 Page: 23 Date Filed: 07/02/2020 ARGUMENT I. Huawei s challenge to the USF rule is ripe Judicial review of recently adopted rules is routinely recognized as ripe. See, e.g., Abbott Labs. v. Gardner, 387 U.S. 136, 149-54 (1967). This case is no exception: (1) the issues are fit for review and (2) Huawei will suffer significant hardship absent review, see Texas v. United States, 497 F.3d 491, 498 (5th Cir. 2007); John Corp. v. City of Houston, 214 F.3d 573, 581-86 (5th Cir. 2000) (assessing ripeness claim by claim). The FCC does not dispute fitness. See Texas, 497 F.3d at 498-99; Order 66 (rule is  [f]inal ). And the rule has caused Huawei both legal and practical hard- ship, which will increase absent review. See Texas, 497 F.3d at 499. The rule is  concrete action that  threatens to impair Huawei s interests, Renewable Fuels Ass n v. EPA, 948 F.3d 1206, 1241 (10th Cir. 2020), targeting Huawei for exclusion from the USF program. And it has caused significant stigmatic and economic injury,  reducing the value of products [Huawei] market[s] and sell[s]. Id. at 1242; see infra pp. 34-36, 43. Carriers will not purchase telecommunications equipment long- term capital investments from a company destined for exclusion from 4 Case: 19-60896 Document: 00515477018 Page: 24 Date Filed: 07/02/2020 the market. Customers have thus canceled business with Huawei, caus- ing  huge financial losses and workforce reductions. A260; see Huawei Br. 59-60; Northern Michigan University Cmts. 5-6, FCC Dkt. No 18-89 (May 18, 2020).1 These harms will worsen absent review. And rural carriers and communities will lose access to Huawei s high-quality, affordable equip- ment and services, undermining the USF statute s purpose, see 47 U.S.C. § 254; A69-71; A733-41, A777-816; A874-81. The Court has an  unflagging obligation to  decide cases within its jurisdiction. Susan B. Anthony List v. Driehaus, 573 U.S. 149, 167 (2014). This is such a case. II. The Commission lacks authority for the USF rule Huawei s Opening Brief showed (at 26-37) that the USF statute, 47 U.S.C. § 254, directs the FCC to use USF funds to expand access to tele- communications services in rural and underserved communities. It does not authorize the FCC to make national security determinations. It lists 1 A____ citations refer to the Fifth Circuit Rule 30.2 Appendix. 5 Case: 19-60896 Document: 00515477018 Page: 25 Date Filed: 07/02/2020 six exclusive guiding principles, id. § 254(b)(1) (6), none of which men- tions national security, even as the Communications Act confers inde- pendent national security authority on the executive branch in other pro- visions. That makes sense, because the FCC, an independent agency, can- not wield independent national security authority. Principles of constitu- tional avoidance and multiple tools of statutory construction compel that conclusion. A. Traditional tools of statutory construction demon- strate that the FCC lacks authority to limit the use of USF funds based on national security judgments No law, including the USF statute, authorized the USF rule. 1.  National security appears nowhere in the USF statute or 47 U.S.C. § 1004, the provision of the Communications Assistance for Law Enforcement Act (CALEA) the Commission invokes. Moreover, the USF statute enumerates exclusive  principles for USF regulation having nothing to do with national security. 47 U.S.C. § 254(b)(1) (6). The Com- mission  may not depart from them  to achieve some other goal. Qwest Corp. v. FCC, 258 F.3d 1191, 1200 (10th Cir. 2001); Huawei Br. 27-37. 2. Other interpretive principles preclude reading § 254 or § 1004 to confer national security decisionmaking authority. 6 Case: 19-60896 Document: 00515477018 Page: 26 Date Filed: 07/02/2020 First, Congress expressly conferred national security authority else- where in the communications laws on the President, e.g., 47 U.S.C. §§ 305(c), 308, 606, confirming that the Commission lacks that authority. See Russello v. United States, 464 U.S. 16, 23 (1983). Second, Congress would not have delegated such significant author- ity through modest, general terms like  quality services, let alone to an inexpert agency. See King v. Burwell, 135 S. Ct. 2480, 2489 (2015); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 147-48 (2000). Third, constitutional avoidance precludes the Commission s read- ing, because delegating national security authority to an independent agency would raise serious separation-of-powers concerns. Huawei Br. 31-33, 35 & n.5; infra pp. 19-21. 3. The recently enacted Secure and Trusted Communications Networks Act of 2019 (SNA), Pub. L. No. 116-124, 134 Stat. 158 (2020), 47 U.S.C. §§ 1601 1609, confirms that the FCC lacks authority for the USF rule. Even if a statute has  a range of plausible meanings,  subse- quent acts can shape or focus those meanings, especially  where the scope of the earlier statute is broad but the subsequent statute[] more 7 Case: 19-60896 Document: 00515477018 Page: 27 Date Filed: 07/02/2020 specifically address[es] the topic at hand. Brown & Williamson, 529 U.S. at 143. The SNA does just that. It prohibits the use of USF funds to pur- chase certain equipment  pos[ing] an unacceptable risk to & national se- curity. 47 U.S.C. §§ 1601(b)(1), 1602(a). But it assigns those national se- curity determinations  exclusively to other entities. Id. §§ 1601(c), 1608(2). The FCC must merely maintain a list of technically defined equipment based on those entities national security determinations. Id. § 1601(b). The SNA thus establishes a more specific regime addressing the same subject in a manner inconsistent with the Order. The Order targets companies Huawei and ZTE based on the FCC s independent national security determinations. The SNA authorizes prohibitions directed to specific equipment, based on other entities determinations. Reading § 254 in light of the SNA shows that the Commission lacked authority for the Order. 8 Case: 19-60896 Document: 00515477018 Page: 28 Date Filed: 07/02/2020 B. The FCC s counterarguments fail 1. The Commission may not recharacterize its na- tional security and foreign affairs judgments on appeal as modest technical assessments To overcome its lack of statutory authority, the FCC attempts on appeal to recast the USF rule as involving modest  technical measures concerning  networks and supply chains. Br. 3; see Br. 38. But an agency may not rely on  post hoc rationalizations to justify its actions; only its  contemporaneous explanations matter. DHS v. Regents of Univ. of Cal., No. 18-587, 2020 WL 3271746, at *10 (U.S. June 18, 2020). The Order s centerpiece is the FCC s independent judgment that China seeks to engage in malicious cyberactivity using complicit private companies. See Order ¶ 41. The FCC reasoned that China has engaged in  extensive and damaging cyberespionage efforts in the United States ; Huawei has  ties to the Chinese government and military apparatus ;  Chinese laws obligat[e] [Huawei] to cooperate with any request by the Chinese government ; and China will pressure Huawei to engage in mis- conduct. Order ¶¶ 44-48, 56. That assessment reflects core national se- curity and foreign affairs judgments about the strategic intentions of a 9 Case: 19-60896 Document: 00515477018 Page: 29 Date Filed: 07/02/2020 foreign sovereign and its proclivity for working through private compa- nies. These are not technical judgments about telecommunications equip- ment vulnerabilities within the Commission s competence. 2. The provisions of the USF statute that the FCC cites do not support the rule The Commission claims authority in three phrases in the USF stat- ute:  quality services, 47 U.S.C. § 254(b)(1);  public interest, id. § 254(c)(1)(D); and  intended use, id. § 254(e). None supports the rule, particularly considering the interpretive principles discussed above. a. Section 254(b)(1) provides that  [q]uality services should be available at just, reasonable, and affordable rates.  [T]echnical terms of art should be interpreted by reference to the trade or industry to which they apply. La. Pub. Serv. Comm n v. FCC, 476 U.S. 355, 372 (1986).  Quality services is an industry term relating exclusively to technical characteristics of data transmission. See, e.g., Microsoft Computer Dic- tionary 432 (5th ed. 2002) ( quality of service means,  [g]enerally, the handling capacity of a system or service; the time interval between re- quest and delivery of a product or service, or,  [i]n computer technology, the guaranteed throughput (data transfer rate) level ). Indeed, the com- munications laws elsewhere define  quality of service (for broadband) to 10 Case: 19-60896 Document: 00515477018 Page: 30 Date Filed: 07/02/2020 mean  download and upload speeds. 47 U.S.C. § 641(12). That  technical terminology presumptively carries a similar meaning here. Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 571 (2012). And the interpretive principles above confirm that, whatever its precise meaning,  quality ser- vices does not authorize national security decisionmaking. b. So too for the phrase  public interest in §§ 201(b) and 254(c)(1)(D). Section 201 permits the Commission to regulate  in the pub- lic interest only to the extent authorized by other  provisions of this chapter. It adds no independent regulatory authority. And § 254(c)(1)(D) requires Joint Board participation, which did not occur here. In any event, its reference to  public interest relates to the  evolving level of telecommunications services, and does not authorize any national secu- rity judgments especially given the interpretive principles discussed above. (i) The Commission insists (at 37-38 & n.6) that the prefatory phrases  national defense and  promoting safety in 47 U.S.C. § 151 sug- gest that the  public interest language in §§ 201 and 254 confers national security authority. But the Communications Act confers authority 11 Case: 19-60896 Document: 00515477018 Page: 31 Date Filed: 07/02/2020 through its substantive provisions, not § 151, which identifies why Con- gress created the FCC, not the agency s powers. Huawei Br. 36-37. Indeed, Comcast Corp. v. FCC, 600 F.3d 642, 655 (D.C. Cir. 2010), which the FCC cites, rejected the argument that § 151  creates  statuto- rily mandated responsibilities,  instead explaining that only  express delegations of regulatory authority can do that. The Commission s other case, NRA v. B AT F, 700 F.3d 185, 199-200 (5th Cir. 2012), examined pre- ambular language to determine why Congress enacted certain firearms laws; it did not hold that prefatory language confers statutory authority. (ii) The Commission also argues (at 35-38, 42-45) that courts have interpreted  public interest in other provisions of the Communications Act, 47 U.S.C. §§ 214 and 310, to give the Commission national security authority. First, even if §§ 214 and 310 did give the FCC national security au- thority, that shows that Congress did not confer such authority in § 201 or § 254. See Russello, 464 U.S. at 23. Second, §§ 214 and 310 confer no independent national security au- thority on the FCC anyway. Those provisions involve other governmental 12 Case: 19-60896 Document: 00515477018 Page: 32 Date Filed: 07/02/2020 entities national security judgments in contexts where Congress overtly recognized that national security considerations might be relevant. Section 214(a) authorizes the Commission to license new telecom- munications lines when  public convenience and necessity require. An- ticipating possible national security or foreign affairs implications, § 214(b) gives the Secretaries of Defense and State the right to comment on license applications. As the FCC acknowledges, it has long deferred to  the expertise of the relevant Executive Branch agencies on national se- curity and foreign affairs related questions arising from license appli- cations. Br. 47. The Commission s § 214 case, Hawaiian Telephone Co. v. FCC, 589 F.2d 647, 649-54, 657-58 (D.C. Cir. 1978), merely upheld Commission ac- tion responding to Defense Department and NASA requests to grant their contractors licenses to build new communications facilities. The court noted that the FCC credited those other agencies national security judg- ments. Id. at 657. The authority to consider expert executive-branch na- tional security judgments when granting licenses does not imply any au- thority to base an entire rule on the Commission s national security judg- ments. 13 Case: 19-60896 Document: 00515477018 Page: 33 Date Filed: 07/02/2020 Section 310(b) reflects a congressional judgment about when cer- tain licenses may be granted to companies with specified levels of foreign ownership. Under § 310(b)(4), the FCC must deny a license if denial will serve  the public interest, but only after a statutory foreign ownership threshold has been met. Indeed, the Commission s § 310 case, Moving Phones Partnership L.P. v. FCC, 998 F.2d 1051, 1055, 1057 (D.C. Cir. 1993) (emphasis added), noted  the national security policy underlying the statute and observed that § 310(b)(4) merely gave  the Commission discretion within the confines of § 310(b). (iii) The Commission also cites 47 U.S.C. §§ 1008 and 1507. Br. 43 n.7. But both those provisions are similarly circumscribed. They at most authorize the Commission to consider  national security as one factor in making narrow, statutorily specified decisions subject to executive branch involvement. Section 1507 requires the Commission to consider  the future needs of homeland security, national security, and other spec- trum users when allocating certain spectrum. That requires executive- branch input indeed, the President has authority to assign frequencies for government use. 47 U.S.C. § 305(a). And § 1008(b)(1) lists  national 14 Case: 19-60896 Document: 00515477018 Page: 34 Date Filed: 07/02/2020 security as one of numerous factors to consider,  after notice to the At- torney General, in determining the achievability of certain CALEA re- quirements. Any authority in these contexts is unlike the free-ranging authority to make independent national security judgments that the FCC claims here. Moreover, Congress express references to  national security in §§ 1008 and 1507 reaffirm that it does not confer such authority through silence. See Russello, 464 U.S. at 23. c. The FCC also cites § 254(e), which obligates  carrier[s] to use USF support only for purposes  for which the support is intended. The provision is a directive to carriers, not a grant of authority to the FCC. And the FCC concedes that it at most contemplates regulations designed to  achieve the principles set forth in section 254(b). Br. 39 (quoting In re FCC 11-161, 753 F.3d 1015, 1046 (10th Cir. 2014)). Indeed, FCC 11-161 upheld a requirement imposed under § 254(e) principally because it was  consistent with those principles. 753 F.3d at 1047; Huawei Br. 34 n.4. Neither § 254(e) nor § 254(b) even mentions national security or foreign affairs. Supra pp. 5-7. 15 Case: 19-60896 Document: 00515477018 Page: 35 Date Filed: 07/02/2020 3. CALEA cannot support the USF rule The Commission wrongly claims (at 39-42) that CALEA authorizes the rule. It first contends (at 40) that the NPRM provided adequate notice of potential reliance on CALEA. But that  notice was a footnote quoting § 1004, with no explanation of how CALEA supported the contemplated rule. See A17 (proposed rule not claiming § 1004 as authority). Regardless, the Commission still has not explained CALEA s rele- vance. It does not dispute that the rule applies far beyond CALEA s scope. CALEA applies only to  switching premises, 47 U.S.C. § 1004, while the rule extends to all equipment; CALEA reaches only  carriers, id. §§ 1001(8), 1004, while the rule reaches schools, libraries, and rural hos- pitals, Order ¶ 22; and CALEA addresses only  interception of communi- cations or access to call-identifying information, 47 U.S.C. § 1004, while the rule covers a wide range of foreign interference with U.S. networks, Order ¶¶ 5, 46, 67-68, 109. The FCC asserts that disregarding statutory limits is  safer and more administrable. Br. 41. But administrative con- 16 Case: 19-60896 Document: 00515477018 Page: 36 Date Filed: 07/02/2020 venience does not confer authority. The Commission must  remain teth- ered to the distinctions Congress drew. Sea Robin Pipeline Co. v. FERC, 127 F.3d 365, 371 (5th Cir. 1997). The rule is also irrationally too narrow, applying only to USF recip- ients, whereas CALEA applies to all carriers. The FCC claims it may in- crementally target the  most acute problem. Br. 41-42. But it never ex- plains why it is rational to respond to a putative threat to the  nation s communications networks, Order ¶ 67, by addressing only systems used by USF recipients who principally serve rural and underserved areas. See Order 116-18 (statement of Commissioner Rosenworcel). 4. The FCC is not entitled to Chevron deference Lacking any valid statutory basis for the Order, the Commission claims Chevron deference for its interpretations of the foregoing provi- sions. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984). Deference is unavailable for two reasons. First, Chevron deference applies only if  traditional tools of statu- tory construction leave  an unresolved ambiguity. Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1630 (2018). Even if a statute is ambiguous, an agency is not entitled to deference when its  interpretation goes beyond 17 Case: 19-60896 Document: 00515477018 Page: 37 Date Filed: 07/02/2020 the limits of what is ambiguous. Whitman v. Am. Trucking Ass ns, 531 U.S. 457, 481 (2001). As explained above, the statutory text does not even arguably give the Commission national security authority, particularly in light of the principles in Part II.A. Second, Chevron would not apply even if there were ambiguity. Def- erence  is premised on the theory that a statute s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps. Brown & Williamson, 529 U.S. at 159. But sometimes  there may be reason to hesitate before concluding that Congress has intended such an implicit delegation. Id. This is such a case. The Commission s con- struction would expand its authority far beyond its institutional telecom- munications expertise to reach core matters of executive policy. These cir- cumstances present paradigmatic grounds for withholding Chevron def- erence. See id. at 159-60 (deference for matters of  economic and political significance not conferred  in so cryptic a fashion ); Huawei Br. 30-31, 33-34. 5. The USF rule requires affirmative statutory au- thority Finally, the FCC claims it needs no statutory authority  so long as [it] does not violate an express statutory command. Br. 48. 18 Case: 19-60896 Document: 00515477018 Page: 38 Date Filed: 07/02/2020 But agencies  ha[ve] no power to act beyond the authority  Con- gress confers. Collins v. Mnuchin, 938 F.3d 553, 562 (5th Cir. 2019) (en banc). The Commission needs affirmative statutory authority, because courts  will not presume a delegation of power based solely on the fact that there is not an express withholding of such power. Michigan v. EPA, 268 F.3d 1075, 1082 (D.C. Cir. 2001). The Commission s cases do not say otherwise. In Alenco Communications, Inc. v. FCC, 201 F.3d 608, 614-15, 621 (5th Cir. 2000), this Court observed that Congress gave the Commis- sion discretion to balance the § 254(b) principles and a competition  di- rective in §§ 251 253. In Texas Office of Public Utility Counsel v. FCC, 183 F.3d 393, 412, 437 (5th Cir. 1999), it held that the Commission may determine  what will constitute  sufficient [USF] support during a tran- sition period under § 254(e). Neither case empowers the FCC to assume statutory authority without an affirmative statutory basis. C. Congress did not (and could not) give the FCC author- ity to rest USF rules on national security or foreign af- fairs judgments Huawei explained (at 30-33) that constitutional avoidance princi- ples preclude reading the communications laws to give the Commission, an independent agency, authority to make independent national security 19 Case: 19-60896 Document: 00515477018 Page: 39 Date Filed: 07/02/2020 or foreign affairs determinations. The Constitution entrusts those func- tions to the President and Congress. The Commission says its Order is  consistent with the President s views. Br. 45. But what if it were not? On the FCC s view, if the President wanted to change his approach to foreign affairs, he would have to seek permission before departing from the Commission s national security judgments. Such concerns are not hypothetical: the Commission recently issued Ligado Networks a 5G license over national security objections from the Defense Department and the National Telecommunications In- formation Administration, and the executive branch has sought reconsid- eration. See NTIA Recons. Pet., IB Dkt. Nos. 11-109, 12-340 (FCC May 22, 2020). The separation of powers is designed to prevent this type of show- down. The Constitution centralizes in the President  foreign policy and national security authority, Am. Ins. Ass n v. Garamendi, 539 U.S. 396, 429 (2003), enabling the nation to speak with  one voice, Zivotofsky v. Kerry, 576 U.S. 1, 14-15, 28 (2015). Huawei Br. 30-33.  [M]ultimember expert agencies may not  wield substantial executive power, Seila Law LLC v. CFPB, No. 19-7, 2020 WL 3492641, at *11 (U.S. June 29, 2020), 20 Case: 19-60896 Document: 00515477018 Page: 40 Date Filed: 07/02/2020 including national security or foreign relations powers, see id. at *14, *17 n.11. And the Constitution s  structural safeguard[s] receive  categorical treatment regardless of whether any  specific harm, or risk of specific harm, can be identified. Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 239-40 (1995). The separation-of-powers inquiry does not  turn on judi- cial assessment of whether an officer exercising executive power is on good terms with other branches. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 500 (2010). It turns on whether the consti- tutionally assigned branch is exercising its authority without impedi- ment. The Communications Act should be construed to avoid this consti- tutional concern. III. The Commission violated the APA and due process in adopt- ing the USF rule A. The USF rule is not a logical outgrowth of the NPRM Huawei explained (at 40-43) that the NPRM did not discuss, much less propose, any procedural protections for designated companies. The procedures adopted in the rule thus are not the logical outgrowth of the NPRM. That violates the APA, 5 U.S.C. § 553, because it deprived inter- ested parties of the opportunity to comment meaningfully on the adopted approach. 21 Case: 19-60896 Document: 00515477018 Page: 41 Date Filed: 07/02/2020 The FCC responds that the NPRM  devoted  an entire section to the designation process. Br. 57. But that  section proposed identifying  companies that pose a national security threat, A8-10 (¶¶ 19-22); it said nothing about how companies would be identified or what procedural pro- tections they would receive. None of the open-ended  approach[es] in the NPRM suggested any process or procedures, much less anything resem- bling the  designations ultimately entrusted to the Bureau. And the NPRM provided no warning that the Commission might  designate Huawei when promulgating the rule. See also A17. Conversely, the final rule s designation procedures are nothing like what the NPRM did say. The final rule does not specify  criteria for iden- tifying a covered company ; explain how any criteria will be imple- mented; rely primarily on National Defense Authorization Acts; or estab- lish a  trusted vendor program. Order ¶ 20 & n.37. The  designation procedures were not a logical outgrowth of the NPRM, and interested parties like Huawei had no opportunity to com- ment on them. 22 Case: 19-60896 Document: 00515477018 Page: 42 Date Filed: 07/02/2020 B. The USF rule is arbitrary and capricious Huawei explained (at 43-51) that the rule is arbitrary and capri- cious because the FCC (1) ignored evidence that it would undermine the USF statute s purposes; (2) engaged in a cost-benefit analysis so irra- tional that Commissioner O Rielly said it  underestimat[ed] the costs based on  no data, Order 112; and (3) failed to meaningfully respond to proposed alternatives, including a risk-based approach that the agency s own advisors recommended. 1. In response, the Commission parrots (at 59) the Order s con- clusory statements about facts and arguments in the record. But the FCC needed to  confront the problem[s] in a reasoned manner, Mozilla Corp. v. FCC, 940 F.3d 1, 67 (D.C. Cir. 2019) (per curiam), and  articulate a satisfactory explanation for its action, Motor Vehicle Mfrs. Ass n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). For example, Huawei s experts showed that Huawei s market pres- ence increases competition and lowers prices. Huawei Br. 45-46; see A394-424, A1016-29. The Commission responded (at 55) with the non- sequitur that  many companies offer  quality services using other sup- 23 Case: 19-60896 Document: 00515477018 Page: 43 Date Filed: 07/02/2020 pliers, and speculated that excluding Huawei  should unleash competi- tion & in the long run. Order ¶ 30. The first response ignores actual ev- idence about excluding Huawei, see A782, A778-85, A794-97, A801-03, A806-10; the second does not explain why eliminating a competitor will  unleash competition. 2. Similarly, the Commission summarizes, without defending, its cost-benefit analysis. Br. 53-57. It waves away (at 55) Huawei s de- tailed explanation (at 49) of costs it ignored, instead alluding to the pu- tative security risks of Huawei s equipment. As Commissioner O Rielly observed,  no data supports the FCC s analysis. Order 112. The Commission also defends calculating the rule s costs by assum- ing it applies only to Huawei and ZTE, stating that it  reasonably worked with the information it had. Br. 56. But a cost assessment must estimate the effect of excluding all covered entities, not just those named at prom- ulgation. Those costs may include increased equipment costs and insol- vency for rural carriers. See, e.g., Huawei Br. 19-20, 45-49. The Commis- sion protests that it had  no basis on which to estimate such costs. Br. 56. But Huawei submitted detailed evidence about similarly situated companies, and extensive economic analysis, Huawei Br. 48-49, 80-81, 24 Case: 19-60896 Document: 00515477018 Page: 44 Date Filed: 07/02/2020 which the Commission  entirely failed to consider, State Farm, 463 U.S. at 43. If the FCC cannot determine whether its rule might apply to other companies, that only confirms that the rule lacks intelligible standards. See infra pp. 26-28. The FCC s defense of its benefits analysis is even worse. Huawei explained (at 50-51) that the Commission relied on no data or analysis when it assumed, with comical precision, that the USF rule would pre- vent at least a 0.162% disruption of annual economic growth, a 0.072% disruption of the digital economy, a 1.68% reduction in malicious cyber- activity, or a 0.137% reduction in the cost of data breaches. Order ¶ 109. The Commission nowhere explained how it knows the rule would produce benefits precisely offsetting its costs. 3. Finally, the FCC s claim (at 56-57) that non- flagship equip- ment can contain vulnerabilities does not support a complete ban on des- ignated companies equipment. The rule could cover all dangerous equip- ment ( flagship or otherwise), regardless of supplier, without banning safe products. The Commission s own advisors recommended such an ap- proach. Huawei Br. 51. There is no evidence the FCC considered it. 25 Case: 19-60896 Document: 00515477018 Page: 45 Date Filed: 07/02/2020 C. The USF rule is standardless and therefore arbitrary and capricious Huawei explained (at 51-57) that the USF rule is standardless, and therefore arbitrary and capricious under the APA. Agencies must define a rule s criteria and articulate comprehensible standards to allow parties to conform their conduct to the rule; prevent arbitrary enforcement; and facilitate judicial review. See, e.g., USPS v. Postal Regulatory Comm n, 785 F.3d 740, 750 (D.C. Cir. 2015); ACA Int l v. FCC, 885 F.3d 687, 700 (D.C. Cir. 2018). But the USF rule defines no key terms and provides no standard or meaningful guidance about what it means to  pos[e] a na- tional security threat. Order 66. Nor does it provide crucial information about the designation process or the quantum or burden of proof. The Commission all but ignores Huawei s APA arguments, focusing almost exclusively on constitutional due process cases. Only one of the FCC s seven cases (Council for Urological Interests v. Burwell, 790 F.3d 212 (D.C. Cir. 2015)) is an APA case, and it doesn t apply here anyway. 1. The FCC argues that it need not specify the  precise contours of the term  national security threat.  Br. 52. But the USF rule provides no contours. That is fatal under the APA, which requires an agency to 26 Case: 19-60896 Document: 00515477018 Page: 46 Date Filed: 07/02/2020  articulate a comprehensible standard in its rules. ACA Int l, 885 F.3d at 700; Huawei Br. 51-57. 2. The Commission claims it may  flesh out its rules through ad- judications and advisory opinions. Br. 51-52 (quoting Urological Inter- ests, 790 F.3d at 226). But a regulation violates the APA if it  offers no meaningful guidance. ACA Int l, 885 F.3d at 700. The FCC cites no au- thority allowing it to promulgate a vague rule, hold parties to it immedi- ately, and rely on as-yet-unpromulgated adjudications and advisory opin- ions to specify the rule s most basic contours. To the contrary, the APA requires agencies to explain the relevant criteria for applying a rule, and why the rule embraces some potential applications but not others. Huawei Br. 52-53. The FCC s cases suggest that agencies may use adju- dications and advisory opinions to resolve  the precise contours of [a] def- inition, Urological Interests, 790 F.3d at 216-17, 226, not to manufacture the content of a rule from whole cloth. The FCC is wrong to suggest that the Commission s  initial desig- nation of Huawei could remedy the USF rule s irrational standardless- ness, because the  initial designation also articulates no standard. In- 27 Case: 19-60896 Document: 00515477018 Page: 47 Date Filed: 07/02/2020 stead it relies on a hodge-podge of ad hoc considerations that fail to dis- tinguish similarly situated parties. See infra p. 28; Huawei Br. 79-81. The Commission also claims that the  initial designation was merely a non- final suggestion to investigate Huawei. The Commission cannot have it both ways: Final agency action must have  legal effect. Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 437 (D.C. Cir. 1986). If the  initial designation is not even final agency action, then it has no legal effect and cannot supply the necessary content for the USF rule. 3. The Commission claims (at 52-53) that, because Huawei al- legedly poses a clear  national security threat, it cannot challenge the vagueness of the USF rule as applied to other companies. For starters, the rule s lack of standards prevents Huawei from determining why it has been designated or conforming to the rule s requirements. In any event, the question is whether a rule is standardless on its face. See, e.g., ACA Int l, 885 F.3d at 700-01. Thus, in Tripoli Rocketry Ass n, Inc. v. BATF, 437 F.3d 75, 83-84 (D.C. Cir. 2006), the court rejected the agency s case-specific evidence, offered to show that the substance at issue  defla- grate[d], because it could not  remed[y] the  complete absence of stand- ards for determining when material  deflagrates. 28 Case: 19-60896 Document: 00515477018 Page: 48 Date Filed: 07/02/2020 D. The Commission s simultaneous issuance of the USF rule and Huawei s  initial designation was impermis- sibly retroactive and violated fair notice As Huawei explained (at 63-69), the FCC s simultaneous promulga- tion of the USF rule and  initial designation of Huawei constituted im- permissible retroactive agency action that violated the APA and the  fair notice requirements of the Due Process Clause. The Commission created a new legal standard and, without prior notice or opportunity to comply, imposed disabilities on Huawei based solely on Huawei s pre-promulga- tion conduct and associations. In the Order, the Commission did not disclaim acting retroactively. Rather, relying on Qwest Services Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007), it claimed that a rulemaking-adjudication hybrid was permissible under the APA thereby necessarily acknowledging the retroactivity in the Order, because adjudications are retroactive. Order ¶ 98 & n.267; see, e.g., De Niz Robles v. Lynch, 803 F.3d 1165, 1170 (10th Cir. 2015) (Gor- such, J.). Huawei explained (at 65-69) that the APA does not permit ad- judications as part of rulemaking proceedings, that the Commission s re- liance on Qwest was misplaced, and that the Order was retroactive rule- making rather than adjudication because there was no preexisting law to 29 Case: 19-60896 Document: 00515477018 Page: 49 Date Filed: 07/02/2020 apply. Now, the FCC abandons its reliance on Qwest and defense of its hybrid procedure under the APA, and instead argues that its Order was not retroactive at all. But an agency must defend its actions based on its contemporaneous rationale. See Regents of Univ. of Cal., 2020 WL 3271746, at *10; SEC v. Chenery, 318 U.S. 80, 87-88 (1943). No defense remains; vacatur is required. In any event, the Commission s new arguments are meritless. The Commission does not dispute that it needs statutory authorization to promulgate retroactive rules; that  designation[s] under the rule use  past behavior and  past facts, Br. 73-74; that Huawei s  initial desig- nation could only have been based on its pre-promulgation conduct; or that a rule is retroactive if it  attaches a new disability to past conduct, Br. 74 (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 269 (1994)). Yet the Commission insists that it acted permissibly. Not so. First, the Commission asserts that Huawei s  initial designation  d[id] not impose any disability. Br. 71. But Huawei challenged the Order as retroactive insofar as it combined a rule and an  initial designation, and both components of the Order impose legal and practical harms. Su- pra pp. 4-5; infra pp. 41-43. 30 Case: 19-60896 Document: 00515477018 Page: 50 Date Filed: 07/02/2020 Second, the Commission argues (at 72-74) that because the rule bars only future USF purchases, and addresses future risk, it is not ret- roactive. But as the Commission acknowledges, retroactivity turns on  whether the conduct that & triggers an agency s action  occurs before or after the law s effective date, Br. 72 (quoting McAndrews v. Fleet Bank of Mass., 989 F.2d 13, 16 (1st Cir. 1993)) not whether the rule s remedies and purposes are forward-looking. See also Landgraf, 511 U.S. at 291 (Scalia, J., concurring). Courts have thus repeatedly recognized that rules or laws that impose burdens based on pre-promulgation conduct are retroactive, even if they do so to address future conduct or mitigate future risk. In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), for example, the Court concluded that  even though [a new law] mandate[d] only that companies pay  future health benefits to former employees to address a public health crisis, it  nonetheless attache[d] new legal consequences to [an employment relationship] completed before its enactment, and was therefore retroactive. Id. at 532, 537 (plurality op.); see id. at 547 (Ken- nedy, J., concurring in the judgment). Similarly, in Smith v. Doe, 538 U.S. 84, 90, 93, 105-06 (2003), the Court recognized that a law requiring sex- 31 Case: 19-60896 Document: 00515477018 Page: 51 Date Filed: 07/02/2020 offender registration based on pre-enactment convictions was  retroac- tive, although the law s purpose was to  protect the public from the  high risk of reoffen[se], not impose additional punishment.2 Third, the Commission argues (at 73-74) that using antecedent facts for subsequent decisionmaking is not retroactive. But the Order did not merely draw upon discrete, objective, antecedent facts to make a de- cision. It assessed Huawei s past acts and associations, determined that Huawei was a national security threat, and imposed a disability based solely on that assessment. Huawei s past conduct thus  trigger[ed] the 2 See also, e.g., United States v. Lovett, 328 U.S. 303, 311-12, 315 (1946) (statute seeking to prevent future  subversive activity constituted (retroactive) punishment for past acts); United States v. Brown, 381 U.S. 437, 438-39, 461-62 (1965) (similar). Contrary to the Commission (at 74- 75), the additional cases Huawei cited also involved retroactive rules aimed at future risks. See, e.g., Nat l Mining Ass n v. Dep t of Interior, 177 F.3d 1, 3, 8 (D.C. Cir. 1999) (rule encouraged  correct[ion] of existing violations); Rock of Ages Corp. v. Sec y of Labor, 170 F.3d 148, 158-59 (2d Cir. 1999) (inspection requirement addressed risk of future  misfires ); United States v. AMC Entm t, Inc., 549 F.3d 760, 762-63, 768-69 (9th Cir. 2008) (theater retrofitting requirement benefitted future handicapped viewers). The Commission s insistence that the Court upheld the regis- tration requirement in Smith v. Doe despite its retroactivity is irrelevant: Congress can legislate retroactively, but agencies without express statu- tory authorization cannot make retroactive rules. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208-09 (1988). 32 Case: 19-60896 Document: 00515477018 Page: 52 Date Filed: 07/02/2020 [rule s] application, McAndrews, 989 F.2d at 16, making the Order im- permissibly retroactive.3 Finally, the Commission s only direct response to Huawei s fair no- tice argument that parties  know what the law is and [can] conform their conduct accordingly, Br. 73 is false as to Huawei, which had no notice of the USF rule until after it was promulgated and imposed on Huawei through the  initial designation. 3 The Commission s cases do not suggest otherwise. In Regions Hos- pital v. Shalala, 522 U.S. 448, 456 (1998), there was no issue of rule ret- roactivity: an unchallenged statute directed an agency to use a prior year s costs to set a baseline for future reimbursements, and the chal- lenged rule merely reaudited the statutory baseline year to ensure accu- rate reimbursements. Bell Atlantic Telephone Cos. v. FCC, 79 F.3d 1195, 1207 (D.C. Cir. 1996), upheld a regulation changing the method for cal- culating pre-promulgation earnings to set future price caps. The case is inconsistent with Supreme Court and subsequent circuit precedent. See supra p. 31-32 & n.2; Nat l Mining, 177 F.3d at 8. And it involved use of discrete, objective past facts to set a future rate limitation not a scheme imposing burdens based on the failure of pre-promulgation conduct to satisfy new standards. And Association of Accredited Cosmetology Schools v. Alexander, 979 F.2d 859, 865 (D.C. Cir. 1992), and Adminis- trators of Tulane Educational Fund v. Shalala, 987 F.2d 790, 798 (D.C. Cir. 1993), predated Landgraf, relied heavily on a  vested rights analy- sis that is incomplete after that case, and involved contexts where retro- activity was imposed largely by statute, not rule. 33 Case: 19-60896 Document: 00515477018 Page: 53 Date Filed: 07/02/2020 IV. The USF rule s  initial designation procedures violate due process A. The USF rule unlawfully fails to provide pre-depriva- tion process As Huawei explained (at 57-63), the rule must be vacated because it provides no process before an  initial designation. The Commission mistakenly concluded that  initially designated companies like Huawei have no constitutionally protected interests. On appeal, the Commission does not contest that the USF rule fails to provide pre-deprivation due process. The rule must be vacated for that reason alone. B. The Commission s counterarguments are meritless Rather than defending the rule s failure to provide pre-deprivation due process, the Commission contends that no process was due before Huawei s particular  initial designation and that, alternatively, Huawei received the process it was due from the NPRM. But the rule itself (which produced Huawei s  initial designation ) unlawfully withholds pre-depri- vation due process. All  initially designated companies will suffer repu- tational harm triggering due process protections, so the rule must con- tain pre-deprivation protections. And the Commission s Huawei-specific arguments are meritless. All the FCC needed to do to avoid defaming and 34 Case: 19-60896 Document: 00515477018 Page: 54 Date Filed: 07/02/2020 stigmatizing Huawei was to send Huawei a private communication about its intentions and reasons in advance. But it did not. 1. The FCC contends (at 66-68) that Huawei s  initial designa- tion did not deprive it of constitutionally protected interests because it was merely nonfinal notice before  final designation. Although the  ini- tial designation is final, see Mathews v. Eldridge, 424 U.S. 319, 330-31 & n.11 (1976), its finality is irrelevant to whether the USF rule provides pre-deprivation due process. It does not, and it must, because as Huawei s experience shows,  initial designation injures due process protected rep- utational interests. Huawei Br. 58-60. 2. The Commission erroneously contends (at 68-70) that Huawei cannot satisfy the stigma-plus test. a. The Order concedes that Huawei s  initial designation will likely  impose some amount of stigma. Order ¶ 102 & n.277; see Huawei Br. 58-60. But the Commission claims that such stigma resulted from the underlying evidence, not the designation itself. The government causes injury each time it stigmatizes Huawei. See Foretich v. United States, 351 F.3d 1198, 1216 (D.C. Cir. 2003). Huawei s  initial designation caused Huawei independent reputational harm, 35 Case: 19-60896 Document: 00515477018 Page: 55 Date Filed: 07/02/2020 prompting carriers to refuse to purchase Huawei equipment (as dis- cussed next), and fear associational stigma from possessing Huawei equipment, USTelecom  The Broadband Ass n Cmts. 2 n.5, FCC Dkt. No. 18-89 (May 20, 2020). Moreover, the Commission s failure to give Huawei due process before its  initial designation deprived Huawei of the oppor- tunity to fully substantiate its reputational injuries. The Commission cannot complain of insufficient evidence when the lack of process itself prevented its development. b. The Commission does not dispute that lost business is a stigma-plus  plus factor. FCC Br. 69; see, e.g., Texas v. Thompson, 70 F.3d 390, 393 (5th Cir. 1995) (per curiam). And Huawei s  initial designa- tion  not the NPRM caused the losses. Before Huawei s  initial desig- nation, customers said they  would continue doing business with Huawei if the Commission abandoned the proposed rule. See, e.g., A791, A794, A807. Afterwards, former customers said they would have kept do- ing business with Huawei but for the designation decision. See, e.g., Northern Michigan University Cmts. 5-6. 3. The Commission wrongly contends (at 70-71) that it gave Huawei the necessary process. 36 Case: 19-60896 Document: 00515477018 Page: 56 Date Filed: 07/02/2020 Due process ordinarily requires  some kind of hearing prior to the deprivation of a liberty interest. Velez v. Levy, 401 F.3d 75, 91 (2d Cir. 2005). Before  initially designating Huawei, the FCC had to afford Huawei procedural protections, including notice of the Commission s ev- idence and reasons and a meaningful opportunity to respond. See, e.g., Ralls Corp. v. CFIUS, 758 F.3d 296, 318-20 (D.C. Cir. 2014). But the FCC gave Huawei no prior notice (through the NPRM or otherwise) of the im- pending  initial designation, the evidence against it, or the pendency or existence of any regulation enabling an  initial designation, nor any op- portunity to respond. See supra pp. 26-28. The Commission contends (at 71) that Huawei will receive full pro- cess during  final designation proceedings. But Huawei s  initial desig- nation represents the full Commission s defamatory assertion that Huawei is a  national security threat, infra pp. 39-42, and thus itself imposes reputational injury, supra pp. 35-36. Without pre-deprivation notice, Huawei s post-deprivation opportunity to comment on its initial designation was  barren. Morgan v. United States, 304 U.S. 1, 18 (1938); see, e.g., Bowlby v. City of Aberdeen, 681 F.3d 215, 221-22 (5th Cir. 2012). 37 Case: 19-60896 Document: 00515477018 Page: 57 Date Filed: 07/02/2020 4. The Commission claims (at 68) that Huawei wants an infinite series of prior notices. But the Commission could simply have sent Huawei a private letter offering an opportunity to respond to factual and legal allegations. See, e.g., 16 C.F.R. § 2.6 (entity  under [FTC] investiga- tion  shall be advised of investigation in  generally nonpublic manner). The Commission s failure to do so offends  fundamental requirements of fairness which are of the essence of due process. Morgan, 304 U.S. at 19. 5. Finally, the Commission contends that it could not provide more process because it needed to  mov[e] swiftly. Br. 71. That post-hoc rationalization is irrelevant. See Regents of Univ. of Cal., 2020 WL 3271746, at *10. It is also incompatible with the Commission s own delay. The Commission relied on a 2012 report, engaged in 18 months of rule- making, spent a month converting a draft into the final Order, and de- layed Federal Register publication another 42 days. Surely it could have found 30 days to provide notice and an opportunity to be heard. Indeed, the Order does not require removal of Huawei equipment or prevent USF recipients from purchasing Huawei equipment using non-USF funds. So the Commission s actions do not seriously address any supposed emer- gency anyway. 38 Case: 19-60896 Document: 00515477018 Page: 58 Date Filed: 07/02/2020 V. The FCC s  initial designation of Huawei was unlawful A. This Court has jurisdiction to review the  initial desig- nation 1. The  initial designation of Huawei is final The Commission wrongly contends (at 61-66) that the  initial des- ignation is not final under the Hobbs Act, 28 U.S.C. § 2342. Finality turns on  substance, not self-serving characterizations. Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110, 1121 (11th Cir. 2014). An order is final if it (a)  mark[s] the  consummation of the agency s deci- sionmaking process ; and (b) produces  legal consequences or deter- mines  rights or obligations. Bennett v. Spear, 520 U.S. 154, 177-78 (1997). Both requirements are met here.4 a. The Commission has completed the decisionmaking process that produced the  initial designation. The  initial designation was the final product of a now-completed rulemaking proceeding, and the agency will not reconsider it. The existence of a separate  final designation pro- ceeding is irrelevant. See, e.g., S.F. Herring Ass n v. Dep t of Interior, 946 4 Contrary to the Commission s claim (at 62), the Hobbs Act imposes no third requirement, i.e., that Huawei lack another adequate judicial remedy. That requirement appears in  [t]he APA s judicial review provi- sion. Sackett v. EPA, 566 U.S. 120, 127 (2012) (quoting 5 U.S.C. § 704). 39 Case: 19-60896 Document: 00515477018 Page: 59 Date Filed: 07/02/2020 F.3d 564, 579 (9th Cir. 2019) ( when there was already final agency ac- tion, regulated entities are  not required to engineer a further final agency action in a different form in order to bring suit ). Moreover, the separate  final designation determination is made by a different deci- sionmaker (the Bureau), on a different record, and possibly under differ- ent standards. See, e.g., Del. Riverkeeper Network v. Sec y Pa. Dep t of Env tl Prot., 903 F.3d 65, 73-74 (3d Cir. 2018) (review by different deci- sionmakers under different rules constitutes  a separate proceeding ). Fi- nality looks to  whether the initial decisionmaker has arrived at a defin- itive position. Id. at 74. The Commission analogizes (at 63-64) this case to FTC v. Standard Oil Co., 449 U.S. 232 (1980). But the complaint there merely  averr[ed] &  reason to believe  a possible violation had occurred; it was just  a pre- requisite to a definitive agency position on the question whether Socal violated the Act. Id. at 234, 241, 246. A  realistic assessment confirms finality. Fidelity Television, Inc. v. FCC, 502 F.2d 443, 448 (D.C. Cir. 1974) (per curiam). The full Commis- sion (rather than the Bureau, as specified in the rule)  initially desig- nated Huawei. Order ¶ 64. It made determinative  find[ings], Order 40 Case: 19-60896 Document: 00515477018 Page: 60 Date Filed: 07/02/2020 ¶ 48, expressed with  confiden[ce], Order ¶ 54. It provided that an  ini- tial designation automatically becomes final absent objection, Order ¶ 40, and assumed in its cost-benefit analysis that Huawei would be fi- nally designated. Huawei Br. 19-20, 48, 65. b. The second finality prong is also satisfied. First,  the agency action imposes [legal] obligations on the agency. Sierra Club v. Trump, 929 F.3d 670, 698 n.23 (9th Cir. 2019); see Bennett, 520 U.S. at 177. The Commission itself contends that its  initial designation developed stand- ards governing the agency s  designation process, Br. 51-52, and  sub- stantially implement[ed] a Commission obligation under the SNA, Draft Declaratory Ruling ¶ 22, WC Dkt. 18-89 (June 25, 2020), https://ti- nyurl.com/y76p4q5n. While the  initial designation cannot overcome the rule s intrinsic vagueness, supra pp. 26-28, or implement the SNA (with which it is inconsistent, supra pp. 7-8), the Commission s concessions end the finality inquiry. See, e.g., Ciba-Geigy, 801 F.2d at 437 (development of rule through interpretation constitutes  legal effect ). The  initial designation also has the same legal effects the Court found sufficient in Bennett. There, petitioners challenged an agency s en- 41 Case: 19-60896 Document: 00515477018 Page: 61 Date Filed: 07/02/2020 vironmental determination, even though it would impose no direct obli- gations on them absent a second agency s later action. 520 U.S. at 177- 78. The Court found the  legal effects prong satisfied because the chal- lenged determination  alter[ed] the legal regime to which the [subse- quent] action agency [wa]s subject. Id. at 178. Similarly, the Commission here claims (at 51-52) that the  initial designation altered the legal land- scape by filling in standards under the rule. And even though (like in Bennett) the  initial designation does not trigger the same legal impedi- ments imposed by a  final designation, it still binds the FCC, Huawei, and USF participants, requiring action to determine whether USF funds may be used to purchase Huawei equipment. See id. It also harmed Huawei by depriving it of due process, supra pp. 34-38, stigmatizing it, and impairing its ability to do business. See CSI Aviation Servs., Inc. v. DOT, 637 F.3d 408, 412-13 (D.C. Cir. 2011) ( cloud of uncertainty over & ongoing business supports finality). These circumstances are unlike those in Standard Oil (FCC Br. 63-65), where the complaint had little  legal or practical effect beyond imposing  expense and annoyance in  responding to the charges. 449 U.S. at 242, 244. 42 Case: 19-60896 Document: 00515477018 Page: 62 Date Filed: 07/02/2020 2. Huawei s challenge to the  initial designation is ripe Huawei s challenge to its  initial designation is also ripe. See also supra pp. 4-5. Huawei s challenges present the kinds of legal issues courts routinely find fit. See, e.g., Nat l Ass n of Home Builders v. U.S. Army Corps of Eng rs, 417 F.3d 1272, 1282 (D.C. Cir. 2005) (arbitrary and capricious claims). The  initial designation also imposes reputational and economic hardship. Supra pp. 4-5. It caused lost sales and opportu- nities,  reducing the value of [Huawei s] products. Renewable Fuels, 948 F.3d at 1242; supra pp. 34-37, 39-42. And those reputational harms are not just practical (though that is enough) they qualify as  legal harm[] (Texas, 497 F.3d at 499) to Huawei s due process protected interests. B. Huawei s  initial designation is arbitrary and capri- cious Huawei demonstrated (at 70-81) that its  initial designation is ar- bitrary and capricious because it (1) misunderstands Chinese law; (2) is not supported by substantial evidence; and (3) irrationally singles out Huawei. The Commission mostly ignores Huawei s arguments, instead summarizing the Order s inadequate explanations. 43 Case: 19-60896 Document: 00515477018 Page: 63 Date Filed: 07/02/2020 1. Huawei already showed (at 70-72) that the Commission is wrong that Chinese law authorizes the Chinese government to force or- ganizations to spy for it. So the Commission suggests (at 78 n.14) the Chinese government may ignore the law. But the Order rests on an erro- neous view of Chinese law, not a finding that it will be disregarded. Order ¶¶ 27, 45-46, 48-49, 56. 2. Huawei explained (at 73-79) that the  initial designation was unsupported by substantial evidence. The Commission responds merely by summarizing (at 75-81) its conclusions. Two reasons warrant vacatur. First, the FCC did not address Huawei s extensive evidence that it is not a national security threat. The FCC  must take [this evidence] into account. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951). Second, the Commission does not justify its reliance on non-evi- dence, like statutes and indictments, or on unreliable materials (like the HPSCI Report, other unreliable hearsay, and other reports it has not carefully reviewed). Huawei Br. 75-79. The Commission says  it need not adhere to judicial standards of evidence. Br. 75 n.13. But substantial ev- idence decisions require agencies to rely on actual (and reliable) evi- dence not mere assertion. Huawei Br. 75-76. 44 Case: 19-60896 Document: 00515477018 Page: 64 Date Filed: 07/02/2020 3. Huawei argued (at 79-81) that the Commission irrationally singled out Huawei. The Commission neither defends its failure to re- spond meaningfully to Huawei s submissions in the rulemaking record, see State Farm, 463 U.S. at 43, nor explains how singling out Huawei was rational. Supra p. 28. 4. The Commission argues the record  showed a serious risk that supports further investigation. Br. 78 n.14. But the Commission did more than investigate. It deemed Huawei a  national security threat. Supra pp. 28, 32-33, 40-41. That determination requires  more than & a suspicion of the existence of the fact to be established. Universal Cam- era, 340 U.S. at 477. Vacatur is required. * * * In its eagerness to pander to members of Congress hostile to Huawei, the Commission issued an unauthorized rule and  initial desig- nation  and, compounding the problem, violated the APA and due pro- cess. The Commissioners own extraordinary communications and state- ments leave little doubt that they prejudged Huawei and were unrecep- tive to reason and evidence. Huawei Br. 11, 14-15, 82-83. The FCC s brief does no better: it either parrots or fails to defend the substantively and 45 Case: 19-60896 Document: 00515477018 Page: 65 Date Filed: 07/02/2020 procedurally flawed arguments the Commission advanced in the Order. The USF rule and  initial designation cannot stand. 46 Case: 19-60896 Document: 00515477018 Page: 66 Date Filed: 07/02/2020 CONCLUSION The Court should vacate the USF rule and  initial designation. Dated: July 2, 2020 Respectfully submitted, /s/ Shay Dvoretzky_ Andrew D. Lipman Glen D. Nager Russell M. Blau Michael A. Carvin David B. Salmons Shay Dvoretzky MORGAN, LEWIS & BOCKIUS LLP Counsel of Record 1111 Pennsylvania Ave., N.W. Karl R. Thompson Washington, D.C. 20004 Parker A. Rider-Longmaid (202) 739-3000 JONES DAY andrew.lipman@morganlewis.com 51 Louisiana Ave., N.W. Washington, D.C. 20001-2113 (202) 879-3939 sdvoretzky@jonesday.com Counsel for Petitioners Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. 47 Case: 19-60896 Document: 00515477018 Page: 67 Date Filed: 07/02/2020 CERTIFICATE OF SERVICE I certify that on July 2, 2020, the foregoing brief was electronically filed with the United States Court of Appeals for the Fifth Circuit using the CM/ECF system, which will accomplish service on all parties. Dated: July 2, 2020 Respectfully submitted, /s/ Shay Dvoretzky Counsel of Record for Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. 48 Case: 19-60896 Document: 00515477018 Page: 68 Date Filed: 07/02/2020 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMIT 1. This document complies with the type-volume limitation of 8500 words, as authorized by this Court s June 3, 2020, Order and Fed- eral Rule of Appellate Procedure 32(e), because it contains 8487 words, excluding the items exempted by Federal Rule of Appellate Procedure 32(f) and Fifth Circuit Rule 32.2. 2. This document complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type-style require- ments of Federal Rule of Appellate Procedure 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2016 in a 14-point Century Schoolbook font. Dated: July 2, 2020 Respectfully submitted, /s/ Shay Dvoretzky Counsel of Record for Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. 49 Case: 19-60896 Document: 00515477018 Page: 69 Date Filed: 07/02/2020 CERTIFICATE OF ELECTRONIC SUBMISSION I certify that: (1) any required privacy redactions have been made; (2) the electronic submission of this document is an exact copy of any cor- responding paper document; and (3) the document has been scanned for viruses with the most recent version of a commercial virus scanning pro- gram and is free from viruses. Dated: July 2, 2020 Respectfully submitted, /s/ Shay Dvoretzky Counsel of Record for Huawei Technologies USA, Inc., and Huawei Technologies Co., Ltd. 50